National Treasury allocates R552.7 billion to strengthen municipal services and governance

National Treasury has allocated R552.7 billion to local government over the 2025 Medium-Term Expenditure Framework (MTEF) period in a bid to boost service delivery, financial sustainability, and governance at municipal level.

According to the newly released Municipal Budget Circular for the 2025/26 Medium-Term Revenue and Expenditure Framework (MTREF), the funding includes R332.4 billion in the local government equitable share, R52.9 billion from the general fuel levy shared with metropolitan municipalities, and R167.4 billion in direct conditional grants.

A key initiative is the consolidation of municipal financial support into a new Local Government Financial Management Capability Development Programme.

The integrated support plan will include multi-year grants, pre-grant capacity assessments, and a scorecard system to monitor progress and improve service delivery.

The Treasury confirmed that the smart prepaid meters grant will continue as an indirect grant, receiving R2.3 billion over the MTEF.

“As indicated in the 2024/25 financial year, the National Treasury now oversees the smart meters grant as an indirect grant through a transversal contract to regulate distribution quality and costs. This grant aims to enhance energy efficiency and support the integration of renewable energy to better meet consumer needs,” it said in the circular.

“Over the 2025 MTEF period, the grant will continue to support municipal debt relief efforts by focusing on municipalities already enrolled in the program. Over time, the grant is expected to expand to additional municipalities, aiming to enhance financial sustainability and management. This grant is allocated R2.3 billion over the 2025 MTEF.”

Several changes have also been made to conditional grant allocations, according to the circular.

These include the creation of an Urban Development Financing Grant (UDFG), realignment of infrastructure grants to prioritise water, sanitation, electricity, and waste management, and the merging or discontinuation of overlapping funding streams to reduce administrative burdens.

The circular